Chairman FBR and Federal Tax Ombudsman Discuss Ways to Remove Maladministration at FBR

Chairman FBR called on Hon’ble Federal Tax Ombudsman (FTO) Mr. Mushtaq Ahmad Sukhera at FTO Secretariat to discuss various issues relating to maladministration and remedial measures for improvement in administration of tax system.

The FTO office shared a paper on reforms agenda with Chairman FBR for improvement in overall service provision of the FBR. Office of the Federal Tax Ombudsman has been identifying and proposing measures to address both, case specific and systemic issues in Tax Administration, from time to time.
According to the paper, on the customs side, the issues of grave concern include smuggling, mis-declarations under invoicing and non transparent auctions. On the Sales Tax side, most pressing issues relate to maladministration in registration and allied matters (including fake registrations) and sanction of fraudulent refunds. On the Federal Excise side, evasion of duty through concealing purchase of raw materials/production of finished goods in records has been found to be major issue. On the Income Tax side, delays in refunds, coercive recoveries through attachment of bank accounts, tedious returns, static tax base, and escape of certain taxable activities from coverage of Tax are major areas of concern for the taxpayers-complainants.
In majority of the complaints to the Hon’ble FTO, it was found that issues hit hard the public include coercive recoveries through attachment of bank accounts and delay in refunds. An in-depth analysis reveals that neglect, delay, inefficiency, ineptitude and corrupt motives of tax functionaries has a greater part to play in cognizable maladministration than problems in laws and procedures.
The Chairman FBR was directed to take immediate action to develop a comprehensive set of operational performance measures where personnel performance can be measured against predeterm standards and objectives. A tenure based policy for lower and middle level functionaries should also be developed and implemented strictly to ensure transfer to other sections/offices after a term of three years. FBR needs to pay more attention to the regime of periodic spot inspections. In case of malpractices and corruption, swift disciplinary action should be initiated and completed.

According to the paper of reform agenda, FTO Office has recommended Inter-wing and Intra-wing IT based linkages, involving periodic third party evaluation, for fast track & realtime cross checking of mis-declarations and frauds as many fraudulent activities have resulted due to late updating of data or changes in modules.

FTO Office recommended simplification of returns forms and an option to file the returns manually with facility of uploading scanned images and punching of data by the functionaries of the respective circles to avoid miss enlisting in the Active Tax Payers list and unattended refunds.

All major tax administrations of world have a charter or bill of taxpayer’s rights. The FTO pointed out that proposals on the subject were sent to FBR which is long overdue and needs prompt attention to ensure fairness and quality treatment to taxpayers.

It was also expressed that the root cause of dis-satisfaction of Tax Payers to the services of FBR is inattention and delays which needs prescribing time lines for ensuring the de-sealing of bank accounts after resolution of issue and shortcoming in the documents should be intimated within a specified period to the applicant of refund and facility of tracking its status. Similarly, in order to stop misuse of registration for issuing fake invoices, immediate disabling of the registration is required in electronic system, pending final de-registration, as soon as the application or compliant on de-registration is received.

In order to ensure increase in filing of returns by employees of government and autonomous bodies it has been proposed that FBR may propose to the concerned Authorities/ Establishment Division, to issue instructions to bind the heads of government departments, autonomous bodies and large scale public sector organizations to get the certificate of filing of returns by the employees falling in the tax net at the end of last date of filing of returns, and link the increments of such employees to availability of these certificates and this may require suitable legislation.

The FTO expressed his views on the provisions of the Sales Tax and Federal Excise Acts that have remained dormant and electronic monitoring system is yet to see the daylight and insisted that parameters of audit selection may be rationalized so that more focus is laid on large entities rather than small taxpayers. Audits should also include the investigative work to detect the evasion through study of input/output standards of utility bills as well as production capacity of machinery etc..

In order to effectively deter the smuggling, criminal prosecution should be initiated against the persons/owners of the show rooms of vehicles, fuel pumps of smuggled oil and storage godowns of other smuggled items and FBR should prescribe Model Auction Rules for auction through electronic means and prepare/operationalize an auction module in the WeBOC system to bring transparency and efficiency in the auctions